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Intel Has Solid 2014 But Shares Still Pricey

We like wide-moat Intel's long-term positioning, but investors should seek a wider margin of safety before buying, writes Morningstar's Peter Wahlstrom.

Overall, we think 2014 represented a very good year for

Fourth-quarter revenue came in at $14.7 billion, up 1% sequentially and 6% year over year, led by continued gains in the data center (up 11% sequentially and 25% year over year). Intel drove both volume and price in the data center, which we view as impressive and telling of the firm's competitive position. The PC group, which had benefited from a refresh cycle in recent quarters, was up 3% year over year but down 3% sequentially as this flame may be diminishing and normalizing in 2015. Separately, while we give the company credit for building out its mobile business and gaining share in tablets, as it's a good strategic move, it's one that hasn't borne much (any) fruit in the way of positive financial impact to the firm. Gross margin was 65.4% versus 65.0% in the third quarter, while operating income was a healthy $4.4 billion. Diluted earnings per share came in at $0.74, up from $0.51 in the prior-year quarter, reflecting the underlying business environment and execution as well as share repurchases over the course of 2014.

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About the Author

Peter Wahlstrom

Sector Director

Peter Wahlstrom, CFA, is director of technology, media, and telecom equity research and a senior software analyst for Morningstar. In addition to leading Morningstar’s technology, media, and telecom sector team, he is also a member of the firm’s Economic Moat committee, a group of senior members of the equity research team responsible for reviewing all Economic Moat and Moat Trend ratings issued by Morningstar. He joined Morningstar in 2010 as an equity analyst and served as director of equity research for the consumer team before assuming his current role.

Before joining Morningstar, Wahlstrom worked in the investment research divisions of Goldman Sachs and RiverSource Investments (Ameriprise Financial).

Wahlstrom holds a bachelor’s degree in economics from the University of Illinois and a master’s degree in business administration from Indiana University’s Kelley School of Business. He also holds the Chartered Financial Analyst® designation. In 2012, Wahlstrom ranked third in the Specialty Retail industry in the StarMine Analyst Awards, presented by the Financial Times.

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